A Comprehensive Essay
In parts 1 and 2 of this comprehensive essay Vertex (VRTX) was the firm we used as a case in point to demonstrate successful criteria and strategies towards evaluating biotech firms. As a matter of fact, we use the histories of real firms in this essay for the sake of demonstrating the above without considering the Companies’ technologies or approved and investigational products, but instead rely only on their stocks’ past performances; no fair evaluation can be possible, which misleads investors.
We have many cases in point which demonstrate various conditions where selloffs of biotech stocks, following some disappointing news, could be superb news for savvy investors who instead of joining the sellers prefer to take advantage of the declined stocks’ prices to buy or accumulate them at bargain prices. We will start Part 3 with our picked firm Incyte as a case in point.
On January 2, 2020 Incyte (INCY) announced that the pivotal Phase 3 GRAVITAS-301 study, which evaluated itacitinib in combination with corticosteroids in patients with treatment-naïve acute graft-versus-host disease (GVHD), did not meet the primary endpoint of improving overall response rate (ORR) at Day 28 compared to placebo plus corticosteroids.
Although improving the ORR in patients with treatment-naïve acute GVHD, itacitinib added to corticosteroids, the difference versus placebo plus corticosteroids, was not statistically significant. In addition, there was no difference observed in non-relapse mortality (NRM) at Month 6, the study’s key secondary endpoint, between the treatment and placebo arms.
Commenting on these results, Steven Stein, M.D., Chief Medical Officer of Incyte, said, “The result of this study is disappointing. However, we remain committed to building on the success of the REACH program for ruxolitinib, which showed positive results in steroid-refractory acute GVHD. Additionally, we will continue to study the role of JAK inhibition in chronic GVHD and in the prophylactic setting, as we seek to develop treatments for patients with this debilitating and often fatal disease.”
Following this announcement Incyte’s stock took a beating; as is usually what happens when trial results fail the tests regardless of the type and/or degree of their failure.
More Compensation for the Incyte Setback
It did not take time, however, for Incyte to compensate for the setback. On January 7, 2020 we learned, from the company, about the validation of its Marketing Authorization Application (MAA) of pemigatinib by the European Medicines Agency (EMA). The validation is for the treatment of adults with locally advanced or metastatic cholangiocarcinoma with a fibroblast growth factor receptor 2 (FGFR2) fusion or refractory after at least one line of systemic therapy.
The EMA’s validation of the MAA confirms that the submission is sufficiently complete to begin the formal review process.
Peter Langmuir, M.D., Group Vice President, Targeted Therapeutics, Incyte explained the need for new therapies for cholangiocarcinoma. This need was recently recognized by the U.S. Food and Drug Administration’s acceptance, for Priority Review, of the firm’s New Drug Application for pemigatinib in November.
The MAA application is based on data from the FIGHT-202 study evaluating pemigatinib as a treatment for patients with previously treated, locally advanced or metastatic cholangiocarcinoma.
Cholangiocarcinoma is a rare cancer classified based on its origin: intrahepatic cholangiocarcinoma (iCCA) occurs in the bile duct inside the liver, and extrahepatic cholangiocarcinoma occurs in the bile duct outside the liver.
The FIGHT-202 Phase 2, open-label, multicenter study (NCT02924376), is evaluating the safety and the efficacy of Incyte’s product pemigatinib, which is a selective fibroblast growth factor receptor (FGFR) inhibitor for adult patients with previously treated, locally advanced or metastatic cholangiocarcinoma with documented FGF/FGFR status.
Cholangiocarcinoma is often diagnosed at a late or advanced stage, which makes the prognosis become poor.
This product advancement was not all that Incyte wanted to have.
Incyte and MorphoSys Collaboration
On January 12, 2020 Incyte announced a collaboration with MorphoSys (MOR) which is expected to lead to the addition of another important product that could probably be approved and marketed in the current year.
MorphoSys and Incyte entered into a collaboration and license agreement to further develop and commercialize MorphoSys’ antibody tafasitamab globally.
Tafasitamab is an Fc-engineered antibody against CD19 currently in a clinical trial for the treatment of B cell malignancies. MorphoSys and Incyte will co-commercialize tafasitamab in the U.S., while Incyte has exclusive commercialization rights outside of the U.S.
- MorphoSys will receive an upfront payment of $750 million and, in addition, Incyte will make an equity investment into MorphoSys of $150 million in new American Depositary Shares (ADS) of MorphoSys at a premium to the share price at signing of the agreement.
- Depending on the achievement of certain developmental, regulatory and commercial milestones, MorphoSys will be eligible to receive milestone payments amounting to up to $1.1 billion. MorphoSys will also receive tiered royalties on ex-U.S. net sales of tafasitamab in a mid-teens to a mid twenties percentage range of net sales.
- In the U.S., MorphoSys and Incyte will co-commercialize tafasitamab and will be jointly responsible for commercialization activities in the U.S. and will share profits and losses on a 50:50 basis.
- Outside the U.S., Incyte will have exclusive commercialization rights and will lead the commercialization strategy and book all revenues from sales of tafasitamab paying MorphoSys royalties on ex-U.S. net sales.
- Furthermore, the companies will share development costs associated with global and U.S.-specific trials at a rate of 55% (Incyte) to 45% (MorphoSys).
- Incyte will cover 100% of the future development costs for trials that are specific to ex-U.S. countries.
- Both parties have agreed to co-develop tafasitamab broadly in relapsed/refractory diffuse large B cell lymphoma (r/r DLBCL), frontline DLBCL as well as additional indications beyond DLBCL, such as: follicular lymphoma (FL), marginal zone lymphoma (MZL) and chronic lymphocytic leukemia (CLL).
- Incyte will be responsible for leading any potential registration-enabling studies in CLL and a phase 3 trial in r/r FL/MZL.
- MorphoSys will continue to be responsible for its currently ongoing clinical trials of tafasitamab in non-Hodgkin lymphoma (NHL), CLL, r/r DLBCL and frontline DLBCL.
The parties will share responsibility in starting additional global trials, and Incyte intends to pursue development in additional territories, including Japan and China.
MorphoSys recently submitted a Biologics License Application (BLA) for tafasitamab, in combination with lenalidomide, to the U.S. Food and Drug Administration (FDA) for the treatment of r/r DLBCL; the FDA decision regarding a potential approval is expected by mid-2020. The submission of a MAA to the EMA) in r/r DLBCL is planned for mid-2020.
The agreement between MorphoSys and Incyte, which includes the equity investment, is subject to clearance by the U.S. antitrust authorities, under the Hart-Scott-Rodino Act, as well as by the German and Austrian antitrust authorities, will become effective as soon as these conditions have been met.
Incyte has demonstrated its strong fundamentals time and time again, which also highlighted its scientifically strong fundamentals and managerial capabilities.
Incyte is revenue-generating; its Jakafi sales are rising as its indications have been increasing; all thanks to the firm’s scientists’ and management decisions to conduct trials with Jakafi for diseases they believe could offer effective results.
In October 2017 the U.S. FDA granted Breakthrough Therapy Designation for tafasitamab in combination with lenalidomide for a specific population.
The ongoing phase 3 study B-MIND assesses the combination of tafasitamab and bendamustine versus rituximab and bendamustine in r/r DLBCL.
Tafasitamab is currently being investigated in patients with relapsed/refractory CLL/SLL after discontinuation of a prior use of ibrutinib in combination with idelalisib or venetoclax.
That’s why we did not rush to sell INCY following the setback like others did but instead accumulated on the stock’s short-term weakness.
The stock is rebounding.
To Be Continued…
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